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In addition to the suitability of agro ecological conditions of Ethiopia and few other driving forces mentioned in the previous paragraph that encourage investment in the Global South, the Ethiopian government investment policy is a key promoter to the development of the flower sector. The exponential growth- noted over the last decades, in flower production and export is however, attributed to three main reasons (1) the incentive packages launched by the government, (2) role played by the Ethiopian Horticulture Producer and Exporter Association, and (3) measures taken by Ethiopian flower growers to remain competitive in the international market.

2.2.4.1. The Incentive Packages

The Ethiopian government had introduced a number of incentive packages for flower grower.

These include easy access to land and loans, and tax holiday (MOI, 2001; EIA, 2008). About 80 percent of the surveyed farms reported confidence in the intention and commitment of the Ethiopian government to promote the flower industry in the country, and arrangements and provisions made to attract and support investors. Most are appreciative of the government efforts such as allowing long term land lease at very low rates³ ($ 10 per hectare/year), tax

3 Price of land rent in Oromia Regional State where this study was conducted range from 70.4 to 135 Birr per hectare per year. EIA. (2008) Investing in the Agricultural Sector of Ethiopia: A guide for New Investors: .

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free import of equipment and planting materials for the first five years), and granting loan up to 70 percent of their total investment capital at lower interest rates

Although 56 percent of the flower farms did not need loans to start their flower businesses, the other 44 percent of flower farms were grateful for the financial assistance received in the forms of loan from various local banks (Construction and Development Bank of Ethiopia, Zemen Bank and Abyssinia Bank). Most flower growers are also contented with the government’s direct involvement in searching for new flower markets, provision of security for trucks from farms to the airport, arrangements made to pay freight fee after selling flowers, and permitting flower industry to conduct research at state owned research institutes.

They are also appreciative of the establishment of the Ethiopian Horticultural Development Agency (EHDA) by the Ethiopian government with a mandate to provide all necessary support to the flower sector.

About 77 percent of the surveyed farms authorities appreciated training and technical support they received from EHPEA. Through, and 56 percent were grateful to EHDA for involving in the search for new flower market opportunities, facilitating duty free imports, representing flower growers in dealing with banks, handling legal matters and attending to problems that are of great concern to flower growers.

Almost all flower growers acknowledged the suitability of agro-ecological conditions of Ethiopia for production of high quality flowers and the abundance of cheap labour force.

About 56 percent of flower growers attested that the labour and land costs are relatively cheaper in Ethiopia when compared to many other commercial flower producing African countries, including the neighbouring Kenya.

Ethiopia Investment Agency, Ministry of Trade and Industry. Addis Ababa. .p.33: With an average exchange rate in 2008 of ($ 1 to 9.64 Birr), this is equivalent to $ 7 to 14.

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2.2.4.2. Contribution of Ethiopian Horticulture Producer and Exporter Association

The Ethiopian Horticulture Producer and Exporter Association (EHPEA) has also played an important role in the expansion of the flower industry in Ethiopia. As an association of flower growers, its tasks are to lobby the government and tackle growers’ problems (EHPEA, 2013).

After EHPEA establishment in 2002, additional incentives were made available to horticultural crop growers and exporters. The establishment of the Ethiopian Horticulture Development Agency (EHDA) in 2008 by the Ethiopian government was one of the major achievements of this lobby group (EHDA, 2011). The EHDA is a state agent which was established to ensure fast and sustainable growth of the horticulture sector, by facilitating flower export and providing all necessary supports to the horticultural sector.

The EHPEA is expanding its horizon and getting stronger with time. Today, the association has 85 member farms, and represents its members at national and international levels, and addresses all matters pertinent to member farms. The association is also involved in capacity building of member farms and provides training and advisory service to all its members (EHPEA, 2013). Recently, the association has introduced a code of practice to achieve sustainable environmental and social responsibility, and insure competitiveness of the Ethiopian flower industry on international markets (EHPEA, 2011).

2.2.4.3. Measures Taken by Ethiopian Flower Growers

With the rapid expansion of the flower industry all over the world, access to markets, delivery of quality products at lower production costs and complying with rising consumer demands, are the major challenges that today’s flower growers are facing. In these regards, the Ethiopian flower growers had taken some measures to remain competitive in the international market and to stay in the flower’s production business.

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The overwhelming majority of Ethiopian flower growers agree with the need to improve quality of flowers to remain competitive on the international market (Table 2.2). However, strategies adopted to supply quality products vary from farm to farm. Training local staff, minimizing post harvest damage, shift from high to low usage of chemicals, and introducing alternative pest management practices were highlighted.

Table 2. 2: Measures Taken To Remain Competitive in the International Market Response Type Percentage Measures Taken by Flower Growers

Improving Quality 83

Low level of chemical usage and use of other pest control mechanisms, training local staff, use of good packing materials, standard cutting, less post harvest damage, follow-up based on customer feedback, rely on technical support from consultants,

Market and Product

Diversity 33

Market diversity other than EU, diversity of product (always supply new product), engage with foreign companies (as joint ventures)

Transparency 10

Transparency between producer, exporter and external markets, comply with environmental policy and labour laws, certifying for fair flower trade and global gap

Stability 10

Stay within the market, be consistent (not off and on), foster strong relationships with local people, make adjustments according to forecast analyses and market research trends

(Source: Own Survey)

About 33 percent of Ethiopian flower growers indicated availability of markets as one of the major problems of their business and emphasized the need to search additional markets instead of totally relying on auction markets in the EU countries. They also emphasized the need for diversification and supply of best quality flowers to remain competitive in the international market.

In this era of a global recession and economic downturn, increase in global flower production with little or no domestic market, and lack of regulation of international flower markets, reliance on one or few products, was reported as risky business. To this effect 13 percent of the flower growers have also started growing vegetables to offset losses from fluctuation of the flower market (Table 2.2).

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Figure 2. 1: Ethiopian Flower Trade

Volume of Export in Million Kg Foreign Exchange Value in Million USD

Author Drawing: Data Source (ITC, 2012b; ERCA, 2012)

As a result of all the effort put together by the Ethiopian government, EHPEA, EHDA and Ethiopian flower growers, the foreign exchange earning of Ethiopia from the flower trade jumped from less than a million USD in 2002 to 178 million USD in 2011, while the volume of cut flowers exported increased from 3.2 to 43 million kilograms in just seven years (Figure 2.1). The progress made so far in promoting the flower industry is promising, however it contribution as a strategy to reduce poverty in Ethiopia needs to be explored.

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